Search Still Eludes Microsoft, Despite Some Progress

A Microsoft executive fielded questions about the company's Internet search-advertising business at Credit Suisse's Technology Conference on Tuesday.

Yusuf Mehdi, senior vice president of Microsoft's online audience business, talked mostly about Bing, Microsoft's latest search engine, at the Phoenix-based event. Microsoft still holds third or fourth place in search engine use after many years of trying to improve its ranking. It faces stiff competition from Google, the No. 1 search provider.

According to the latest Market Share stats, 84.9 percent of Internet searches worldwide use Google's search engine, followed by Yahoo's (6.2 percent worldwide), China's Baidu (3.3 percent in China) and Microsoft's Bing (3.3 percent in the United States).

Bing has only been launched in the U.S. market so far. However, Mehdi said that Microsoft just "flipped to the first version" of Bing in the United Kingdom and is getting close to rolling out Bing in Canada.

"We have a very long way to go in search," Mehdi said. He noted that Google has been doing search for about 10 to 12 years, while Microsoft's Bing launched in the U.S. market about six months ago. Bing, which Microsoft developed after hiring several key Yahoo executives and technical personnel, is replacing Microsoft's earlier Windows Live search engine.

Mehdi cited comScore stats saying that Bing had attained a 9.9 percent U.S. market share after six months. He also claimed that the Bing brand had carved out a "45 percent" market awareness among consumers, "which is pretty unheard of" in such a short time.

To boost its market share, Microsoft is currently trying to get regulatory approval for a search-ad business deal with Yahoo that was agreed to back in July. The deal could get finalized in "early 2010," Mehdi said. He clarified that the proposal is "not a joint venture" with Yahoo. He described it as a business deal in which Microsoft will do all of the technical work.

The proposed deal calls for Yahoo to build its Internet ad business on top of Bing. For its part, Microsoft plans to allocate $100 million to $200 million for turnaround costs in the first year. The most difficult part of the Microsoft-Yahoo search deal has been migrating advertising campaigns from one platform to another, according to Mehdi.

Microsoft is also moving into the mobile sphere with search. The company already has a search deal in place with Verizon, Mehdi said. He added that mobile devices eventually will take some of the search market share away from the PC. In addition, mobile devices will open up new search experiences for users. People will be able search by voice commands and use GPS for mapping and local information on their mobile phones, he said.

Microsoft has been doing a lot of work with rich clients, such as RIM's devices and Apple's iPhone, Mehdi said. To some extent, hardware and software vendors have been taking control of elements that used to be carrier owned, such as introducing new form factors or operating systems, he added.